Illinois Basic Business Taxes 2012

Illinois' economic development, finance, and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include a single sales factor tax, sales and use tax exemptions, and income tax credits.

Corporate income tax:
Corporate net income is taxed at 7 percent with an additional 2.5 percent for corporate personal property replacement tax. The tax is levied only on net income apportioned to the state. For tax years ending on or after December 31, 2000, apportionment will be based on sales alone. No deduction is allowed for federal income taxes paid.

Sales and use taxes:
A 6.25 percent sales tax is levied on retail purchases of tangible personal property; services are not subject to sales and use tax in Illinois. Tangible personal property transferred as part of a sale of services is taxable. Home rule units of government may impose sales and use taxes at rates varying from 0.25-1 percent. Additional water commission, mass transit, and county public safety sales taxes may apply in some communities.

Sales and use tax exemptions:
The following items are exempted from the sales and use taxes: manufacturing machinery and replacement parts, computers used to control manufacturing machinery, printing presses, rolling stock used by carriers in interstate commerce, watercraft fuel, newsprint and ink, raw materials, and component parts. Food and prescription drugs are taxed at reduced rates.

Single sales factor tax:
For tax years ending on or after Dec. 31, 2000, corporations apportion their income to Illinois based solely on sales. Apportionment is the method for determining which state the income of corporations operating in more than one state will be taxed.

Property tax:
All personal property of businesses is exempt from property tax. Inventories, machinery, and intangibles are exempt. Real property is subject to the property tax and assessed at one-third actual value, except in Cook County, where nonresidential commercial property and industrial property is assessed at 25 percent.

Income tax credits:
Investments in tangible depreciable property with a lifetime of four years or more qualify for credits that include a 0.5 percent credit for investment in mining, manufacturing or retailing, plus an additional 0.5% if employment increases over 1%; and an additional 0.5% investment tax credit for investments in Enterprise Zones.

Property tax abatement:
Upon a majority vote, any local taxing district can give a 10-year, $4 million abatement to industrial or commercial firms newly located or expanding in the taxing district. Property tax abatements without dollar limits or time limits are available in enterprise zones.

Energy and fuel conservation measures:
Devices fueled by low sulfur dioxide emission coal are exempt from sales and use taxes.

Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.